DEDHAM, Mass., Oct. 31, 2019 /CNW/ --
Third Quarter 2019 Financial Highlights
- Net income attributable to Atlantic Power increased to
$12.6 million or $0.10 per diluted share from a net loss of
$3.2 million or ($0.03) per diluted share in Q3 2018
- Project income increased to $27.9
million from $26.2 million in
Q3 2018
- Cash from operating activities increased to $36.4 million from $19.5
million in Q3 2018
- Project Adjusted EBITDA increased to $48.9 million from $45.4
million in Q3 2018
- Repaid $18.3 million of term loan
and project debt; leverage ratio improved to 3.7 times
- Liquidity at September 30, 2019
of $181 million, including
approximately $24 million of
discretionary cash, after using $29
million for two acquisitions in July and August
Third Quarter 2019 Developments
- Completed the acquisition of the Allendale and Dorchester contracted biomass plants for
$12.6 million and the acquisition of
equity interests in the Craven
County and Grayling contracted biomass plants for
$18.7 million
- Williams Lake biomass plant
executed new 10-year contract with BC Hydro, effective Oct. 1, 2019
- Equipment malfunction and fire at Cadillac plant resulted in significant damage;
financial impact expected to be limited to insurance deductibles of
approximately $2.5 million to
$3.0 million
2019 Updated Outlook
- Increased 2019 Project Adjusted EBITDA guidance to a range of
$185 million to $195 million from a range of $175 million to $190
million(1)
- Increased estimate of 2019 operating cash flow (assuming
working capital changes are nil) to a range of $115 million to $125
million from a range of $100
million to $115 million
Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic
Power" or the "Company") today reported its financial results for
the three and nine months ended September
30, 2019.
"During the third quarter, we acquired two contracted biomass
plants and equity interests in two others at attractive valuations.
These acquisitions increase the level and length of our contracted
cash flows. We also executed a new ten-year contract for our
Williams Lake biomass plant. All
of these are expected to be accretive to our estimates of intrinsic
value per share," said James J.
Moore, President and CEO of Atlantic Power. "Financial
results for the third quarter exceeded our expectations, in a
continuation of the first half performance, and we have increased
our full year guidance accordingly. We continue to allocate our
cash flow and liquidity rationally to debt reduction, repurchases
of common and preferred shares, and external acquisitions when
expected returns appear to be superior to those we can obtain
internally."
Mr. Moore continued, "The most challenging event of the quarter
was the fire at our Cadillac plant
in September. Fortunately, no one was injured. We tell our people
that safety is more important than money. We are proud of our
Cadillac employees as well as
those across Atlantic Power for the way they responded on
September 22 and afterward. Although
the plant incurred significant damage and is expected to be out of
service for a lengthy period, we expect that the financial impact
will be limited by our insurance coverage."
____________________________________________________________________________________
(1)The Company has not provided guidance for Project
income or Net income because of the difficulty of making accurate
forecasts and projections without unreasonable efforts with respect
to certain highly variable components of these comparable GAAP
metrics, including changes in the fair value of derivative
instruments and foreign exchange gains or losses. These factors,
which generally do not affect cash flow, are not included in
Project Adjusted EBITDA.
Atlantic Power
Corporation
|
Table 1 - Summary
of Financial Results
|
(in millions of
U.S. dollars)
|
Unaudited
|
Three months
ended
|
Nine months
ended
|
|
September
30,
|
September
30,
|
|
2019
|
2018
|
2019
|
2018
|
Project
revenue
|
$71.1
|
$65.4
|
$215.4
|
$211.6
|
Project
income
|
27.9
|
26.2
|
80.1
|
68.0
|
Net income (loss)
attributable to Atlantic Power Corporation
|
12.6
|
(3.2)
|
22.7
|
12.1
|
Cash provided by
operating activities
|
36.4
|
19.5
|
104.5
|
97.8
|
Cash used in
investing activities
|
(29.1)
|
(14.5)
|
(28.0)
|
(16.9)
|
Cash used in
financing activities
|
(20.3)
|
(29.7)
|
(87.1)
|
(107.9)
|
Project Adjusted
EBITDA
|
48.9
|
45.4
|
153.2
|
138.5
|
All amounts are in
U.S. dollars and are approximate unless otherwise indicated.
Project Adjusted EBITDA is not a recognized measure under generally
accepted accounting principles in the United States ("GAAP") and
does not have a standardized meaning prescribed by GAAP; therefore,
this measure may not be comparable to similar measures presented by
other companies. Please refer to "Non-GAAP Disclosures" on
page 15 of this news release for an explanation and a
reconciliation of "Project Adjusted EBITDA" as used in this news
release to Project income (loss).
|
Financial Results for the Three Months Ended September 30, 2019
Third quarter 2019 results for Project Adjusted EBITDA and
operating cash flow exceeded expectations, mostly because of the
acquisitions of Allendale and
Dorchester and equity interests in
Craven and Grayling in the third
quarter (which were not included in the Company's initial guidance)
and the new contract for the Williams
Lake biomass plant (which avoided severance expense and
inventory adjustments that previously had been expected to be
recorded in the third quarter).
Project income, Net income and Project Adjusted
EBITDA
Project income for the third quarter of 2019 was
$27.9 million, a $1.7 million increase from $26.2 million in the year-ago period. Project
revenue increased $5.7 million as a
result of the acquisition of Allendale and Dorchester in July
2019, higher water flows at Curtis Palmer, the start-up of
Tunis under a new Power Purchase
Agreement (PPA) in October 2018 and
the consolidation of Koma Kulshan in July
2018. Depreciation and amortization expense decreased
$4.8 million as the 2018 period
included $5.3 million of amortization
expense for the remaining PPA intangible asset at Nipigon. These favorable comparisons were
partially offset by the non-recurrence of the $6.7 million step-up gain on the consolidation of
Koma Kulshan in 2018 and a $1.0
million insurance loss on the Cadillac fire recorded in
2019.
Net income attributable to Atlantic Power
Corporation for the third quarter of 2019 was $12.6 million compared to a $3.2 million net loss in the third quarter of
2018. The improvement of $15.8
million was primarily attributable to the $1.7 million increase in Project income, a
$7.3 million reduction in foreign
exchange loss ($2.8 million gain
versus a $4.5 million loss in 2018),
lower interest expense of $3.7
million, a $2.8 million
increase in the fair value of the convertible debenture conversion
option (included in "Other (income) expense, net"), and a
$3.4 million reduction in income tax
expense. The foreign exchange gain of $2.8
million was related to the revaluation of debt denominated
in Canadian dollars (the Canadian dollar depreciated from
June 30, 2019 to September 30,
2019).
Project Adjusted EBITDA for the third quarter of
2019 increased $3.5 million to
$48.9 million from $45.4 million in the third quarter of 2018. The
increase was primarily driven by the acquisitions of Allendale, Dorchester, Craven and Grayling during the quarter (+$1.7
million); Curtis Palmer (+$1.5 million), which had a 30% increase
in generation due to higher water flows; Cadillac (+$1.1 million), which had an
extended outage in the 2018 period; Frederickson (+$1.0 million),
due to higher dispatch and lower maintenance expense, and
Tunis (+$1.0 million), which
incurred maintenance expense in the 2018 period in preparation for
its October 2018 start-up. Increases
at these projects were partially offset by decreases at
Williams Lake (-$1.7 million), due to voluntary curtailment
resulting from low fuel inventory; Oxnard (-$1.6
million), due to gas turbine repairs, and Nipigon (-$1.2
million), due to maintenance associated with an upgrade of
the gas turbine control system.
Cash Flow
Cash provided by operating activities for the third
quarter of 2019 was $36.4 million, an
increase of $16.9 million from
$19.5 million in the third quarter of
2018. The increase was primarily attributable to higher Project
Adjusted EBITDA, a $5.9 million
increase in distributions from unconsolidated affiliates (including
$3.8 million related to the September
distribution from Orlando, which
in 2018 was received in October), and a $1.2
million reduction in cash interest payments due to lower
debt balances. In addition, cash flow benefited from a $7.2 million favorable year-over-year change in
working capital.
Cash used in investing activities for the third
quarter of 2019 was $29.1 million
compared to $14.5 million in the
third quarter of 2018. In the 2019 period, the Company acquired the
Allendale and Dorchester biomass plants and equity interests
in the Craven and Grayling biomass
plants for $28.5 million, whereas in
2018, the Company acquired the remaining 50% ownership of the Koma
Kulshan hydro facility and bought out the operation and maintenance
contract for an aggregate $11.7
million. Also in the 2018 period, the Company made a
$2.6 million deposit for the
acquisition of the Allendale and
Dorchester plants.
Cash used in financing activities for the third
quarter of 2019 was $20.3 million as
compared to $29.7 million in the
third quarter of 2018. In 2019, the Company repaid $18.3 million of term loan and project debt, paid
$1.8 million of preferred dividends
and repurchased $0.1 million of
common and preferred shares. In the comparable 2018 period, the
Company repaid $20.8 million of term
loan and project debt, repurchased $6.6
million of common and preferred shares and paid $2.0 million of preferred dividends.
During the third quarter of 2019, the net decrease in the
Company's cash, restricted cash and cash equivalents was
$13.0
million.
Financial Results for the Nine Months Ended September 30, 2019
The Company had strong increases in Project income and Project
Adjusted EBITDA for the first nine months of 2019, reflecting a 34%
increase in generation at Curtis Palmer driven by higher water
flows, the non-recurrence of the Manchief gas turbine overhaul in
the second quarter of 2018, and the start-up of Tunis in October
2018, partially offset by the short-term contract extension
for Williams Lake that began in
April 2018 which reduced the
project's gross margin. Cash provided by operating activities also
increased, but to a lesser degree than Project Adjusted EBITDA,
because changes in working capital had a larger positive impact on
operating cash flow in 2018 than in 2019.
Project income, Net income and Project Adjusted
EBITDA
Project income for the first nine months of 2019 was
$80.1 million, a $12.1 million increase from $68.0 million in the comparable 2018 period.
Project revenue increased $3.8
million due primarily to revenue increases at Curtis Palmer,
which benefited from higher water flows; the acquisitions of
Allendale, Dorchester, Craven and Grayling in the third quarter of
2019; Tunis, which re-started
operations in October 2018, and Koma
Kulshan, which was consolidated in July
2018. These revenue increases were partially offset by
decreases at the San Diego
projects, which ceased operations in February 2018; Williams
Lake, due to the short-term contract extension and lower
dispatch; and Kenilworth, due to a
steam revenue adjustment. Operations and maintenance expense
decreased $11.9 million, mostly at
Manchief, the San Diego projects
and Tunis. Depreciation and
amortization expense decreased $17.2
million due to lower amortization at Nipigon and the shutdown of the San Diego projects. Decreases in these
expenses were partially offset by an $11.9
million unfavorable change in the fair value of derivative
instruments and the non-recurrence of the $6.7 million step-up gain on the consolidation of
Koma Kulshan in 2018.
Net income attributable to Atlantic Power
Corporation for the first nine months of 2019 was
$22.7 million compared to
$12.1 million in the comparable 2018
period. The increase of $10.6 million
was primarily attributable to the $12.1
million increase in Project income, a $7.7 million reduction in interest expense, and a
$5.3 million reduction in income tax
expense. These favorable drivers were partially offset by a foreign
exchange loss of $7.1 million as
compared to a $9.1 million gain in
the comparable 2018 period, related to the revaluation of debt
denominated in Canadian dollars as the Canadian dollar appreciated
from December 31, 2018 to
September 30, 2019.
Project Adjusted EBITDA for the first nine months of
2019 increased $14.7 million to
$153.2 million from $138.5 million in the comparable 2018 period. The
increase was primarily driven by Curtis Palmer (+$10.1 million),
Manchief (+$7.5 million), and Tunis (+$6.6 million), for reasons previously
described; Orlando (+$1.8
million), due to a capacity rate escalation and lower fuel prices;
the acquisitions of Allendale,
Dorchester, Craven and Grayling (+$1.7 million);
Frederickson (+$1.4 million), due to higher dispatch, and the
San Diego projects (+$1.4
million), due to severance and related expenses incurred in the
2018 period. Increases at these projects were partially offset by
decreases at Williams Lake
(-$6.6 million), due to the
short-term contract extension and voluntary curtailment;
Oxnard (-$2.9 million), due to gas turbine repairs;
Chambers (-$2.8 million), due to
lower energy and steam demand as well as lower excess energy
pricing; and modest decreases at Mamquam and Nipigon.
Cash Flow
Cash provided by operating activities for the first
nine months of 2019 was $104.5
million, a $6.7 million
increase from $97.8 million in the
comparable 2018 period. The increase was primarily due to the
$14.7 million increase in Project
Adjusted EBITDA, a $4.0 million
increase in distributions from unconsolidated affiliates and a
$3.3 million reduction in cash
interest payments due to lower debt balances and a lower rate on
the Company's credit facilities. These positive variances were
partially offset by a $17.3 million
adverse impact from changes in working capital. The 2018 period
included a $29.2 million release of
working capital by Kapuskasing,
North Bay and the three
San Diego projects when they
ceased operation.
Cash used in investing activities for the first nine
months of 2019 was $28.0 million as
compared to $16.9 million in the
comparable 2018 period. In 2019, the Company used $28.7 million to acquire Allendale and Dorchester and equity interests in
Craven and Grayling and realized
$1.6 million of salvage proceeds from
the San Diego projects. In 2018,
the Company used $12.8 million to
acquire the remaining ownership interests in Koma Kulshan and
$2.6 million for a deposit on the
purchase of Allendale and
Dorchester.
Cash used in financing activities for the first nine
months of 2019 was $87.1 million as
compared to $107.9 million in the
comparable 2018 period. In 2019, the Company repaid $52.3 million of term loan and project debt,
redeemed $18.5 million (US$
equivalent) of the remaining Series D convertible debentures,
repurchased $8.8 million of common
and preferred shares, paid $5.5
million of preferred dividends and made $2.0 million of cash payments for vested LTIP
units withheld for taxes. In the comparable 2018 period, the
Company issued $92.2 million of
Series E convertible debentures, redeemed $88.1 million of Series C and Series D
convertible debentures, repaid $79.5
million of term loan and project debt, repurchased
$20.3 million of common and preferred
shares, incurred $5.1 million of
deferred financing costs and paid $6.3
million of preferred dividends.
During the first nine months of 2019, the net decrease in the
Company's cash, restricted cash and cash equivalents was
$10.6
million.
Liquidity and Balance Sheet
Liquidity
As shown in Table 2, the Company's liquidity at September 30, 2019 was $181.2 million, a decrease of $13.2 million from $194.4
million at June 30, 2019. The
reduction was primarily attributable to the use of cash for the two
acquisitions that closed in the third quarter. At September 30, 2019, there was $31.2 million of cash at the parent, of which the
Company considers approximately $24
million to be discretionary cash available for general
corporate purposes.
Atlantic Power
Corporation
|
Table 2 -
Liquidity
|
(in millions of
U.S. dollars)
|
Unaudited
|
|
Sept. 30,
2019
|
June 30,
2019
|
Cash and cash
equivalents, parent
|
$31.2
|
$45.6
|
Cash and cash
equivalents, projects
|
26.9
|
25.8
|
Total cash and cash
equivalents
|
58.1
|
71.4
|
Revolving credit
facility
|
200.0
|
200.0
|
Letters of credit
outstanding
|
(76.9)
|
(77.0)
|
Availability under
revolving credit facility
|
123.1
|
123.0
|
Total
liquidity
|
$181.2
|
$194.4
|
|
|
|
Excludes restricted
cash of:
|
$1.7
|
$1.4
|
Balance Sheet
Debt Repayment
During the third quarter of 2019, the Company repaid
$17.5 million of the APLP Holdings
term loan and amortized $775 thousand
of project-level debt. Year to date through September 2019, the Company has repaid
$50.0 million of the term loan and
amortized $2.3 million of
project-level debt. In addition, the Company redeemed the remaining
6.00% Series D Debentures in April
2019 (Cdn$24.7 million, or
US$18.5 million equivalent).
At September 30, 2019, the
Company's consolidated debt was $664.2
million, excluding unamortized discounts and deferred
financing costs, and the Company's consolidated leverage ratio
(consolidated gross debt to trailing 12-month consolidated Adjusted
EBITDA) was 3.7 times, which was improved from 4.0 times at
June 30, 2019.
The Company expects to repay approximately $15.8 million of consolidated debt in the fourth
quarter of 2019, bringing the total for the year to approximately
$86.6 million, and expects to have a
leverage ratio at year end 2019 in line with the September 30th level.
Normal Course Issuer Bid (NCIB) Update
In the third quarter of 2019, the Company repurchased and
canceled 12,000 shares of the Cumulative Rate Reset Preferred,
Series 2, at Cdn$18.30 per share, for
a total cost of Cdn$220 thousand
(US$168 thousand equivalent). Earlier
this year, the Company reached the 10% limit on Series 1 and Series
3 repurchases under this NCIB. Also during the third quarter, the
Company repurchased and canceled 2,067 common shares at an average
price of $2.27 per
share.
2019 Updated Guidance
The Company has not provided guidance for Project income or Net
income because of the difficulty of making accurate forecasts and
projections without unreasonable efforts with respect to certain
highly variable components of these comparable GAAP metrics,
including changes in the fair value of derivative instruments and
foreign exchange gains or losses. These factors, which generally do
not affect cash flow, are not included in Project Adjusted
EBITDA.
The Company is increasing its guidance for 2019 Project Adjusted
EBITDA to a range of $185 million to
$195 million from a range of
$175 million to $190 million. The most significant driver of the
increase is higher water flows at Curtis Palmer, which have
resulted in generation that is well above the historical average
(25% higher through September). The acquisitions of Allendale and Dorchester and equity interests in
Craven and Grayling are another
positive driver, as these were not reflected in the previous
guidance. The new contract for Williams
Lake avoided severance expenses and non-cash inventory
writeoffs that had been assumed in the previous guidance. Results
also have benefited from higher dispatch at Manchief relative to
previous expectations. Partially offsetting these positive factors
are gas turbine repair expense at Oxnard and the impact of the business
interruption insurance deductible at
Cadillac.
Table 3 provides a bridge of the Company's 2019 Project Adjusted
EBITDA guidance to an estimate of 2019 Cash provided by operating
activities. For purposes of providing this bridge to a cash flow
measure, the impact of changes in working capital is assumed to be
nil. The increase relative to the Company's previous estimate
reflects the higher expected level of Project Adjusted EBITDA and
the deferral of the majority of the San
Diego decommissioning cost outlays to 2020.
Atlantic Power
Corporation
|
Table 3 - Bridge
of 2019 Project Adjusted EBITDA Guidance to Cash Provided by
Operating Activities
|
(in millions of
U.S. dollars)
|
Unaudited
|
|
|
|
2019
Guidance
|
2019
Guidance
|
|
(Revised
10/31/19)
|
(Initial
2/28/19)
|
Project Adjusted
EBITDA
|
$185 -
$195
|
$175 -
$190
|
Adjustment for equity
method projects(1)
|
(5)
|
(5)
|
Corporate G&A
expense
|
(22)
|
(22)
|
Cash interest
payments
|
(39)
|
(39)
|
Cash taxes
|
(2)
|
(4)
|
Decommissioning (San
Diego projects)
|
(1)
|
(5)
|
Other (including
changes in working capital)
|
-
|
-
|
Cash provided by
operating activities
|
$115 -
$125
|
$100 -
$115
|
Note: For the
purpose of providing bridge of Project Adjusted EBITDA guidance to
a cash flow measure, the impact of changes in working capital on
Cash provided by operating activities is assumed to be nil. See
comment in preceding paragraph.
|
(1) For equity method projects,
represents difference between Project Adjusted EBITDA and cash
distribution.
|
Operational Updates
Cadillac Equipment Malfunction and Fire
On September 22, 2019, the
Company's Cadillac biomass plant,
located in Cadillac, Michigan,
experienced a malfunction in its steam turbine that began a rapid
cascade of events, sparking a fire that resulted in extensive
damage to the turbine, generator and other components in that area
of the plant. The boiler, cooling tower, fuel pile and fuel
handling areas of the plant were not affected. The Company is
working to complete its assessment of the damage and its
investigation of the cause of the fire. The plant is expected to be
offline for an extended period.
The financial impact of this incident and the extended outage is
expected to be limited as the Company believes its property
insurance is adequate to cover the cost of repair and replacement
of equipment, less a $1.0 million
deductible. In the third quarter of 2019, the Company recorded a
$25.2 million writedown of
Cadillac property, plant and
equipment and capital spares inventory, and recorded a
corresponding insurance receivable of $24.2
million. Both the writedown and the insurance receivable are
subject to future adjustments based on actual experience of
replacement cost. The $1.0 million
deductible was recorded as a charge to other project income and
reduced net income, but did not affect Project Adjusted EBITDA or
operating cash flow. The Company also carries business interruption
insurance, which will effectively replace Cadillac's Project Adjusted EBITDA after the
45-day deductible is met in November. The impact of the 45-day
deductible on Project Adjusted EBITDA and operating cash flow is
estimated to be approximately $1.5
million to $2.0 million, most
of which will occur in the fourth quarter of 2019.
Decommissioning of San Diego Projects
The Company is in the process of decommissioning its three
project sites in San Diego (Naval
Station, Naval Training Center and North Island), and will be
soliciting demolition bids in November. The current estimate for
total decommissioning costs is $6.6
million. Net of $1.8 million
of salvage proceeds received to date, the net cash outlay is
estimated to be approximately $5
million. These estimates are subject to adjustment pending
receipt of final bids for the demolition work. The Company expects
that the substantial majority of these expenditures will be
incurred in the first half of 2020.
Maintenance and Capex
In the third quarter of 2019, the Company incurred $5.7 million of maintenance expense. For the nine
months ended September 30, 2019,
maintenance expense totaled $16.5
million. For the full year, which does not have any planned
major outages, the Company is projecting maintenance expense of
approximately $24.0 million and
capital expenditures of approximately $1.1
million. (All of these figures include the Company's
proportional share of maintenance expenses and capital expenditures
at equity method investments.)
Commercial Updates
Biomass Acquisitions
On July 31, 2019, the Company
completed the acquisition of the Allendale and Dorchester plants in South Carolina for $12.6 million, including closing adjustments.
This consisted of $2.6 million paid
as a deposit in September 2018 and
the remaining $10.0 million at
closing. The Allendale and
Dorchester plants have been in
service since 2013 and have a capacity of 20 megawatts each. All of
their output is sold to Santee Cooper under PPAs that run to the
fourth quarter of 2043. The Company expects the two projects
to generate a combined Project Adjusted EBITDA of approximately
$3 million annually on average over
the remaining term of their PPAs. The Company is evaluating modest
optimization investments for 2020 to improve boiler efficiency and
plant reliability, reduce maintenance expense and increase access
to a wider range of fuels at lower cost.
On August 13, 2019, the Company
completed the acquisition of a 50% interest in the 48 megawatt
Craven County plant in
North Carolina and a 30% interest
in the 37 megawatt Grayling plant in Michigan for $18.7
million, including $0.2
million of transaction costs incurred prior to closing.
Craven has been in service since
October 1990 and has a PPA with Duke
Energy. Grayling has been in service since June 1992 and has a PPA with Consumers Energy,
the utility subsidiary of CMS Energy. Both PPAs expire on
December 31, 2027. The projects are
operated by an affiliate of CMS Energy. The Company expects the two
projects to generate a combined Project Adjusted EBITDA of
approximately $4 million to
$5 million annually on average over
the remaining term of their PPAs. Craven and Grayling are accounted for under
the equity method.
Both acquisitions were funded from the Company's discretionary
cash.
Williams Lake Contract
The Company's Williams Lake
biomass plant in British Columbia,
Canada executed a new ten-year Energy Purchase Agreement
(EPA) with BC Hydro effective October 1,
2019. Prior to that date the plant had been operating under
a short-term contract, which expired on September 30, 2019.
Under the EPA, Williams Lake
will receive a fixed price per megawatt-hour for energy produced,
up to the maximum level of generation permitted. The plant will not
operate during the months of May, June and July. The price is
escalated annually at the British Columbia CPI. The EPA does not
provide for a capacity payment or a fuel cost passthrough.
Conditions in the British
Columbia timber market for the past couple of years have
adversely affected the availability and cost of fuel, which are
critical inputs to the plant's financial performance. The Company
is currently focused on fuel procurement for 2020 and is in the
process of building supply through a variety of sources.
The plant is not expected to operate in the fourth quarter of
2019, in part due to a minimal supply of fuel on site. As a result,
the plant is expected to generate an EBITDA loss in the fourth
quarter of 2019. Beginning in the fourth quarter and continuing
into 2020 and 2021, the Company plans to undertake significant
required maintenance at the plant consistent with a new ten-year
contract. Based on the expected level of maintenance expense, the
Company estimates that the plant will generate a breakeven or
minimal level of EBITDA in 2020. The Company intends to provide
longer-term EBITDA guidance for Williams
Lake at a later date. It is likely that Williams Lake will have greater EBITDA and
cash flow variability as compared to the Company's other contracted
biomass plants.
Financial Results by Segment and by Project
A schedule of Project income (loss) and Project Adjusted EBITDA
by segment for the three and nine months ended September 30, 2019 and the comparable 2018
periods can be found on page 14 of this release.
A schedule of Project income (loss), Project Adjusted EBITDA and
Cash Distributions by project for the three and nine months ended
September 30, 2019 and the comparable
2018 periods can be found in the third quarter 2019 presentation on
the Company's website. Cash Distributions from Projects is the
amount of cash distributed by the projects to the Company out of
available project cash flow after all project-level operating
costs, interest payments, principal repayment, capital expenditures
and working capital requirements.
Supplementary Information Regarding Non-GAAP
Disclosures
A discussion of non-GAAP disclosures and a schedule reconciling
Project Adjusted EBITDA, a non-GAAP measure, to the comparable GAAP
measure, can be found on page 15 of this release.
Investor Conference Call and Webcast
Atlantic Power's management team will host a telephone
conference call and webcast on Friday,
November 1, 2019 at 8:30 AM
ET. Management's prepared remarks and an accompanying
presentation will be available on the Conference Calls page of the
Company's website prior to the call.
Conference Call / Webcast Information:
Date: Friday, November
1, 2019
Start Time: 8:30 AM
ET
Phone Numbers:
U.S. (Toll Free): 1-855-239-3193
Canada (Toll Free):
1-855-669-9657
International (Toll): 1-412-542-4129
Conference Access: Please request access to the
Atlantic Power conference call.
Webcast: The call will be broadcast over Atlantic
Power's website at www.atlanticpower.com.
Replay / Archive Information:
Replay: Access conference call number 10135978 at
the following telephone numbers:
U.S. (Toll Free): 1-877-344-7529
Canada (Toll Free):
1-855-669-9658
International (Toll): 1-412-317-0088
The replay will be available one hour after the end of the
conference call through December 1,
2019 at 11:59 PM
ET.
Webcast archive: The conference call will be archived
on Atlantic Power's website at www.atlanticpower.com for a period
of 12 months.
About Atlantic Power
Atlantic Power is an independent power producer that owns power
generation assets in eleven states in the
United States and two provinces in Canada. The Company's generation projects sell
electricity and steam to investment-grade utilities and other
creditworthy large customers predominantly under long‑term PPAs
that have expiration dates ranging from 2019 to 2043. The Company
seeks to minimize its exposure to commodity prices through
provisions in the contracts, fuel supply agreements and hedging
arrangements. The projects are diversified by geography, fuel
type, technology, dispatch profile and offtaker (customer).
The majority of the projects in operation are 100% owned and
directly operated and maintained by the Company. The Company has
expertise in operating most fuel types, including gas, hydro, and
biomass, and it owns a 40% interest in one coal project.
Atlantic Power's shares trade on the New York Stock Exchange
under the symbol AT and on the Toronto Stock Exchange under the
symbol ATP. For more information, please visit the Company's
website at www.atlanticpower.com or contact:
Atlantic Power Corporation
Investor Relations
(617) 977-2700
info@atlanticpower.com
Copies of the Company's financial data and other publicly filed
documents are available on SEDAR at www.sedar.com or on EDGAR at
www.sec.gov/edgar.shtml under "Atlantic Power Corporation" or on
the Company's website.
************************************************************************************************************************
Cautionary Note Regarding Forward-Looking Statements
To the extent any statements made in this news release contain
information that is not historical, these statements are
forward-looking statements within the meaning of Section 27A of the
U.S. Securities Act of 1933, as amended, and Section 21E of the
U.S. Securities Exchange Act of 1934, as amended, and
forward-looking information under Canadian securities law
(collectively, "forward-looking statements").
Certain statements in this news release may constitute
"forward-looking statements", which reflect the expectations of
management regarding the future growth, results of operations,
performance and business prospects and opportunities of the Company
and its projects. These statements, which are based on certain
assumptions and describe the Company's future plans, strategies and
expectations, can generally be identified by the use of the words
"may," "will," "should," "project," "continue," "believe,"
"intend," "anticipate," "expect" or similar expressions that are
predictions of or indicate future events or trends and which do not
relate solely to present or historical matters. Examples of such
statements in this press release include, but are not limited, to
statements with respect to the following:
- the Company's view that the acquisitions of the Allendale, Dorchester, Craven and Grayling biomass plants were done
at attractive valuations and that they increase the level and
length of the Company's contracted cash flows;
- the Company's expectation that the biomass acquisitions and the
new contract at Williams Lake will
be accretive to its estimates of intrinsic value per share;
- the Company's expectation that the Cadillac plant will be out of service for an
extended period but that the financial impact will be limited due
to insurance coverage, with a preliminary estimate of the Company's
exposure of $2.5 million to
$3.0 million, consisting of a
$1.0 million deductible on its
property insurance and a $1.5 million
to $2.0 million impact from the
45-day deductible under its business interruption insurance;
- Project Adjusted EBITDA and operating cash flow in the three
months ended September 30, 2019 were
ahead of the Company's expectations;
- the Company's view that approximately $24 million of cash at the parent is available
for discretionary purposes;
- the Company's expectation that it will repay approximately
$15.8 million of consolidated debt
over the remainder of the year, and that its leverage ratio at year
end 2019 will be in line with the September
30th level;
- the Company's guidance for 2019 Project Adjusted EBITDA in the
range of $185 million to $195 million;
- the Company's estimate for 2019 Cash provided by operating
activities in the range of $115
million to $125 million,
assuming for this purpose that changes in working capital are
nil;
- the Company's estimation that cash outlays associated with the
decommissioning of the three San
Diego projects will total approximately $6.6 million and that work will be completed in
the first half of 2020;
- the Company's estimation that, in 2019, including its share of
equity-owned projects, maintenance expense will total approximately
$24.0 million and capital
expenditures will total approximately $1.1
million;
- the Company's estimate that the Allendale and Dorchester plants will generate a combined
Project Adjusted EBITDA of approximately $3
million annually on average over the remaining term of their
PPAs;
- the Company's plans for optimization investments at the
Allendale and Dorchester plants;
- the Company's estimate that the acquisition of equity ownership
interests in Craven and Grayling
will generate a combined Project Adjusted EBITDA of approximately
$4 million to $5 million annually on average over the remaining
term of the PPAs;
- the Company's views of the British
Columbia timber market;
- the Company's expectations with respect to its ability to
procure fuel for Williams Lake,
and its assessment that the availability and cost of fuel are
critical inputs to the plant's financial performance;
- the Company's plans for maintenance expenditures at
Williams Lake in 2020 and
2021;
- the Company's estimate that Williams
Lake will have an EBITDA loss in the fourth quarter of 2019
and a breakeven or minimal level of EBITDA in 2020;
- the Company's view that it is likely that Williams Lake will have greater EBITDA and
cash flow variability as compared to the Company's other contracted
biomass plants; and
- the results of operations and performance of the Company's
projects, business prospects, opportunities and future growth of
the Company will be as described herein.
Forward-looking statements involve significant risks and
uncertainties, should not be read as guarantees of future
performance or results, and will not necessarily be accurate
indications of whether or not or the times at or by which such
performance or results will be achieved. Please refer to the
factors discussed under "Risk Factors" and "Forward-Looking
Information" in the Company's periodic reports as filed with the
U.S. Securities and Exchange Commission (the "SEC") from time to
time for a detailed discussion of the risks and uncertainties
affecting the Company. Although the forward-looking statements
contained in this news release are based upon what are believed to
be reasonable assumptions, investors cannot be assured that actual
results will be consistent with these forward-looking statements,
and the differences may be material. These forward-looking
statements are made as of the date of this news release and, except
as expressly required by applicable law, the Company assumes no
obligation to update or revise them to reflect new events or
circumstances.
Atlantic Power
Corporation
|
|
|
Table 4 –
Consolidated Balance Sheet
|
|
|
(in millions of
U.S. dollars)
|
|
|
Unaudited
|
|
|
|
September
30,
|
December
31,
|
|
2019
|
2018
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$58.1
|
$68.3
|
Restricted
cash
|
1.7
|
2.1
|
Accounts
receivable
|
35.3
|
35.7
|
Current portion of
derivative instruments asset
|
0.1
|
4.2
|
Inventory
|
18.2
|
15.8
|
Prepayments
|
5.2
|
4.0
|
Income taxes
receivable
|
2.3
|
0.3
|
Lease
receivable
|
1.5
|
-
|
Other current
assets
|
0.7
|
5.9
|
Total current
assets
|
123.1
|
136.3
|
Property, plant, and
equipment, net
|
505.7
|
549.5
|
Equity investments in
unconsolidated affiliates
|
152.6
|
140.8
|
Power purchase
agreements and intangible assets, net
|
151.9
|
170.1
|
Goodwill
|
21.3
|
21.3
|
Derivative
instruments asset
|
-
|
0.3
|
Operating lease
right-of-use assets
|
5.9
|
-
|
Insurance recovery
receivable
|
24.2
|
-
|
Other
assets
|
3.3
|
6.2
|
Total
assets
|
$988.0
|
$1,024.5
|
Liabilities
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$3.4
|
$2.5
|
Accrued
interest
|
3.5
|
2.3
|
Other accrued
liabilities
|
19.4
|
20.2
|
Current portion of
long-term debt
|
108.1
|
68.1
|
Current portion of
derivative instruments liability
|
10.8
|
4.5
|
Convertible
debentures
|
-
|
18.1
|
Operating lease
liabilities
|
1.5
|
-
|
Other current
liabilities
|
0.6
|
0.2
|
Total current
liabilities
|
147.3
|
115.9
|
Long-term debt, net
of unamortized discount and deferred financing costs
|
457.3
|
540.7
|
Convertible
debentures, net of discount and unamortized deferred financing
costs
|
79.1
|
75.7
|
Derivative
instruments liability
|
15.5
|
15.4
|
Deferred income
taxes
|
6.9
|
9.0
|
Power purchase
agreements and intangible liabilities, net
|
20.1
|
21.2
|
Asset retirement
obligations, net
|
50.9
|
49.2
|
Operating lease
liabilities
|
5.0
|
-
|
Other long-term
liabilities
|
3.9
|
5.0
|
Total
liabilities
|
$786.0
|
$832.1
|
Equity
|
|
|
Common shares, no par
value, unlimited authorized shares; 109,379,611 and
108,341,738 issued and outstanding at September 30, 2019 and
December 31, 2018
|
1,261.3
|
1,260.9
|
Accumulated other
comprehensive loss
|
(143.1)
|
(146.2)
|
Retained
deficit
|
(1,098.9)
|
(1,121.6)
|
Total Atlantic Power
Corporation shareholders' equity
|
19.3
|
(6.9)
|
Preferred shares
issued by a subsidiary company
|
182.7
|
199.3
|
Total
equity
|
202.0
|
192.4
|
Total liabilities and
equity
|
$988.0
|
$1,024.5
|
Atlantic Power
Corporation
|
|
|
Table 5 -
Consolidated Statements of Operations
|
(in millions of
U.S. dollars, except per share amounts)
|
Unaudited
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
September
30,
|
September
30,
|
|
2019
|
2018
|
|
2019
|
2018
|
Project
revenue:
|
|
|
|
|
|
Energy
sales
|
$29.2
|
$25.0
|
|
$102.7
|
$94.8
|
Energy capacity
revenue
|
38.0
|
29.5
|
|
99.8
|
72.9
|
Other
|
3.9
|
10.9
|
|
12.9
|
43.9
|
|
71.1
|
65.4
|
|
215.4
|
211.6
|
Project
expenses:
|
|
|
|
|
|
Fuel
|
19.4
|
16.7
|
|
55.2
|
54.0
|
Operations and
maintenance
|
19.5
|
18.0
|
|
54.6
|
66.5
|
Depreciation and
amortization
|
16.2
|
21.0
|
|
48.5
|
65.7
|
|
55.1
|
55.7
|
|
158.3
|
186.2
|
Project other income
(loss):
|
|
|
|
|
|
Change in fair value
of derivative instruments
|
1.1
|
-
|
|
(8.3)
|
3.6
|
Equity in earnings of
unconsolidated affiliates
|
12.1
|
10.2
|
|
34.4
|
33.7
|
Interest,
net
|
(0.3)
|
(0.4)
|
|
(0.9)
|
(1.4)
|
Insurance
loss
|
(1.0)
|
-
|
|
(1.0)
|
-
|
Other income
(expense), net
|
-
|
6.7
|
|
(1.2)
|
6.7
|
|
11.9
|
16.5
|
|
23.0
|
42.6
|
Project
income
|
27.9
|
26.2
|
|
80.1
|
68.0
|
|
|
|
|
|
|
Administrative and
other expenses:
|
|
|
|
|
|
Administration
|
5.5
|
5.7
|
|
17.3
|
17.9
|
Interest expense,
net
|
10.9
|
14.6
|
|
33.0
|
40.7
|
Foreign exchange
(gain) loss
|
(2.8)
|
4.5
|
|
7.1
|
(9.1)
|
Other (income)
expense, net
|
(0.2)
|
2.5
|
|
0.7
|
0.3
|
|
13.4
|
27.3
|
|
58.1
|
49.8
|
Income (loss) from
operations before income taxes
|
14.5
|
(1.1)
|
|
22.0
|
18.2
|
Income tax
expense
|
0.2
|
3.6
|
|
2.4
|
7.7
|
Net income
(loss)
|
14.3
|
(4.7)
|
|
19.6
|
10.5
|
Net income (loss)
attributable to preferred shares of a subsidiary company
|
1.7
|
(1.5)
|
|
(3.1)
|
(1.6)
|
Net income (loss)
attributable to Atlantic Power Corporation
|
$12.6
|
($3.2)
|
|
$22.7
|
$12.1
|
Net earnings (loss)
per share attributable to Atlantic Power Corporation
shareholders:
|
|
|
|
|
|
Basic
|
$0.12
|
($0.03)
|
|
$0.21
|
$0.11
|
Diluted
|
$0.10
|
($0.03)
|
|
$0.19
|
$0.11
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
Basic
|
109.4
|
111.1
|
|
109.4
|
112.8
|
Diluted
|
137.8
|
111.1
|
|
138.3
|
142.3
|
Atlantic Power
Corporation
|
|
|
Table 6 -
Consolidated Statements of Cash Flows
|
|
(in millions of
U.S. dollars)
|
Nine months
ended
|
Unaudited
|
September
30,
|
|
2019
|
2018
|
Cash provided by
operating activities:
|
|
|
Net income
|
$19.6
|
$10.5
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
48.5
|
65.7
|
Gain on disposal of
fixed assets and inventory
|
(0.1)
|
-
|
Other gain
|
(0.8)
|
-
|
Gain on step
acquisition of equity investment
|
-
|
(6.7)
|
Share-based
compensation
|
1.2
|
1.8
|
Asset retirement
obligation
|
1.4
|
-
|
Insurance
loss
|
1.0
|
-
|
Equity in earnings
from unconsolidated affiliates
|
(34.4)
|
(33.7)
|
Distributions from
unconsolidated affiliates
|
41.4
|
37.4
|
Unrealized foreign
exchange loss (gain)
|
7.3
|
(8.6)
|
Change in fair value
of derivative instruments
|
9.8
|
(3.3)
|
Amortization of debt
discount, deferred financing costs and operating lease right-of-use
assets
|
6.4
|
7.4
|
Change in deferred
income taxes
|
(1.8)
|
5.0
|
Change in other
operating balances
|
|
|
Accounts
receivable
|
4.7
|
19.7
|
Inventory
|
0.3
|
0.8
|
Prepayments and other
assets
|
(0.2)
|
3.2
|
Accounts
payable
|
(1.3)
|
(1.0)
|
Accruals and other
liabilities
|
1.5
|
(0.4)
|
Cash provided by
operating activities
|
104.5
|
97.8
|
|
|
|
Cash used in
investing activities:
|
|
|
Investment in
unconsolidated affiliates
|
(18.7)
|
-
|
Cash paid for
acquisition, net of cash received
|
(10.0)
|
(12.8)
|
Deposit for
acquisition
|
-
|
(2.6)
|
Proceeds from asset
sales
|
1.6
|
-
|
Purchase of property,
plant and equipment
|
(0.9)
|
(1.5)
|
Cash used in
investing activities
|
(28.0)
|
(16.9)
|
|
|
|
Cash used in
financing activities:
|
|
|
Proceeds from
convertible debenture issuance
|
-
|
92.2
|
Repayment of
convertible debentures
|
(18.5)
|
(88.1)
|
Common share
repurchases
|
(0.8)
|
(12.3)
|
Preferred share
repurchases
|
(8.0)
|
(8.0)
|
Repayment of corporate
and project-level debt
|
(52.3)
|
(79.5)
|
Cash payments for
vested LTIP units, including amounts withheld for taxes
|
(2.0)
|
(0.8)
|
Deferred financing
costs
|
-
|
(5.1)
|
Dividends paid to
preferred shareholders
|
(5.5)
|
(6.3)
|
Cash used in
financing activities:
|
(87.1)
|
(107.9)
|
|
|
|
Net decrease in cash,
restricted cash and cash equivalents
|
(10.6)
|
(27.0)
|
Cash, restricted cash
and cash equivalents at beginning of period
|
70.4
|
84.9
|
Cash, restricted cash
and cash equivalents at end of period
|
$59.8
|
$57.9
|
|
|
|
Supplemental cash
flow information
|
|
|
Interest
paid
|
$27.0
|
$30.3
|
Income taxes paid,
net
|
$3.5
|
$2.5
|
Accruals for
construction in progress
|
$0.2
|
$-
|
Atlantic Power
Corporation
|
|
|
|
|
Table 7 - Project
Income (Loss) and Project Adjusted EBITDA by Segment
|
|
|
(in millions of
U.S. dollars)
|
|
|
|
|
Unaudited
|
|
|
|
|
|
Three months
ended
|
Nine months
ended
|
|
September
30,
|
September
30,
|
|
2019
|
2018
|
2019
|
2018
|
Project income
(loss)
|
|
|
|
|
East U.S.
|
$16.8
|
$12.7
|
$59.3
|
$51.5
|
West U.S.
|
5.9
|
12.6
|
6.3
|
4.4
|
Canada
|
7.1
|
1.2
|
22.9
|
9.8
|
Un-allocated
Corporate
|
(1.9)
|
(0.3)
|
(8.4)
|
2.3
|
Total
|
$27.9
|
$26.2
|
$80.1
|
$68.0
|
Project Adjusted
EBITDA
|
|
|
|
|
East U.S.
|
$31.4
|
$25.5
|
$100.8
|
$89.8
|
West U.S.
|
11.6
|
11.5
|
24.5
|
16.9
|
Canada
|
6.1
|
8.3
|
28.0
|
31.5
|
Un-allocated
Corporate
|
(0.2)
|
0.1
|
(0.1)
|
0.3
|
Total
|
$48.9
|
$45.4
|
$153.2
|
$138.5
|
Non-GAAP Disclosures
Project Adjusted EBITDA is not a measure recognized under GAAP
and does not have a standardized meaning prescribed by GAAP, and is
therefore unlikely to be comparable to similar measures presented
by other companies. Investors are cautioned that the Company may
calculate this non-GAAP measure in a manner that is different from
other companies. The most directly comparable GAAP measure is
Project income (loss). Project Adjusted EBITDA is defined as
Project income (loss) plus interest, taxes, depreciation and
amortization, impairment charges, insurance loss (gain), other
(income) expenses and changes in the fair value of derivative
instruments. Management uses Project Adjusted EBITDA at the project
level to provide comparative information about project performance
and believes such information is helpful to investors. A
reconciliation of Project Adjusted EBITDA to Project income and to
Net income on a consolidated basis is provided in Table 8
below.
Atlantic Power
Corporation
|
|
|
|
|
Table 8 -
Reconciliation of Net Income (Loss) to Project Adjusted
EBITDA
|
|
|
(in millions of
U.S. dollars)
|
|
|
|
|
Unaudited
|
|
|
|
Three months
ended
|
Nine months
ended
|
|
September
30,
|
September
30,
|
|
2019
|
2018
|
2019
|
2018
|
Net income (loss)
attributable to Atlantic Power Corporation
|
$12.6
|
($3.2)
|
$22.7
|
$12.1
|
Net income (loss)
attributable to preferred share dividends of a subsidiary
company
|
1.7
|
(1.5)
|
(3.1)
|
(1.6)
|
Net income
(loss)
|
$14.3
|
($4.7)
|
$19.6
|
$10.5
|
Income tax
expense
|
0.2
|
3.6
|
2.4
|
7.7
|
Income (loss) from
operations before income taxes
|
14.5
|
(1.1)
|
22.0
|
18.2
|
Administration
|
5.5
|
5.7
|
17.3
|
17.9
|
Interest expense,
net
|
10.9
|
14.6
|
33.0
|
40.7
|
Foreign exchange
(gain) loss
|
(2.8)
|
4.5
|
7.1
|
(9.1)
|
Other (income)
expense, net
|
(0.2)
|
2.5
|
0.7
|
0.3
|
Project
income
|
$27.9
|
$26.2
|
$80.1
|
$68.0
|
|
|
|
|
|
Reconciliation to
Project Adjusted EBITDA
|
|
|
|
|
Depreciation and
amortization
|
$20.2
|
$25.0
|
$60.6
|
$78.0
|
Interest expense,
net
|
0.8
|
(0.6)
|
2.0
|
2.7
|
Change in the fair
value of derivative instruments
|
(1.0)
|
-
|
8.3
|
(3.5)
|
Insurance
loss
|
1.0
|
-
|
1.0
|
-
|
Other (income)
expense, net
|
-
|
(5.2)
|
1.2
|
(6.7)
|
Project Adjusted
EBITDA
|
$48.9
|
$45.4
|
$153.2
|
$138.5
|
View original
content:http://www.prnewswire.com/news-releases/atlantic-power-corporation-releases-third-quarter-2019-results-300949527.html
SOURCE Atlantic Power Corporation